EURHUF consolidation ahead of NBH rate decision - breakout soon
First of all let me note this exoctic fx cross has become really volatile recently, and mkt quote is less liquid as well. Pls really take it into consideration when opening a trade in EURHUF, always check daily ATR for proper position sizing.
After jan-feb massive blow up move, EURHUF has started to consolidate in a wide range of 308 / 312, but also within a tightenning flag. Ichimoku analyses also tells us undecision of price on the 4 Hrs time frame.
However what is interesting on the daily chart despite the long term bullish trend, some chances of a corrective counter move has risen. On the daily chart my favourite indicator that I use for swing trading is the 10,3,3 Slow Stochastic setup. At mom this is pointing down, while also regular MACD is bearish. From Ichimoku elements Tenkan Sen and Senkou Span A (future cloud upper line) started to point down. Daily Kijun is around 307,50 (in line with 4 Hrs horizontal support, so more important from now to watch)
Fridays's bearish move was due to a better than expected GDP print, but again px got blocked ard 308 lvl.
Tomorrow there will be a rate setting MPC meeting in Hungary, which will be closely watched by the mkt. FRA pricing is not sure about further rate cuts now, however I still think they might cut an additional 10 bps down to 2,75 %... and that will likely be the end of their rate cutting cycle for some time. So even if they cut, the big question is if they hint any comments after the rate setting, that might be read as less dovish for the close future. We must watch px action closely, as together with the ongoing global risk on sentiment we might see a break of lower support and then a corrective move to 303-305 lvls. However if the breakout happens to the upside, then the measured move tgt from the daily flag is 320.
All in all I tend to play it for the short side now, maybe trying to catch a spike tomorrow for selling into it.
Some fundamental background: HUF used to be one of the best traditional carry trades for years, since it always had a high nominal and real rate, thus supportive swap points for short trades. However the current MPC of the National Bank is considered to be super dovish, with continous temptation to cut base rate as low as possible (Base rate is at 2,85 % now), while also pumping the economy with loads of liquidity through their so called growth credit program, with a maximum effective available rate of 2,5 % for companies. (special goulash QE :-) )
They always refer to their mid term CPI tgt, which is 3 %. While the last headline CPI print recently published showed a big 0 %, the number is tricky, as it is mainly due to continous central price management (forced px deflation) for the households utilities (gas, electricity, etc.) by the government. Meanwhile the core CPI is at 3,5 %, so we can say there's effectively a negative real rate in Hungary now. This can be harmful in the long run for the HUF, but for now it is well ballanced by EU funds inflow and C/A surplus, while the NBH fx reserves are at really high levels too.
After jan-feb massive blow up move, EURHUF has started to consolidate in a wide range of 308 / 312, but also within a tightenning flag. Ichimoku analyses also tells us undecision of price on the 4 Hrs time frame.
However what is interesting on the daily chart despite the long term bullish trend, some chances of a corrective counter move has risen. On the daily chart my favourite indicator that I use for swing trading is the 10,3,3 Slow Stochastic setup. At mom this is pointing down, while also regular MACD is bearish. From Ichimoku elements Tenkan Sen and Senkou Span A (future cloud upper line) started to point down. Daily Kijun is around 307,50 (in line with 4 Hrs horizontal support, so more important from now to watch)
Fridays's bearish move was due to a better than expected GDP print, but again px got blocked ard 308 lvl.
Tomorrow there will be a rate setting MPC meeting in Hungary, which will be closely watched by the mkt. FRA pricing is not sure about further rate cuts now, however I still think they might cut an additional 10 bps down to 2,75 %... and that will likely be the end of their rate cutting cycle for some time. So even if they cut, the big question is if they hint any comments after the rate setting, that might be read as less dovish for the close future. We must watch px action closely, as together with the ongoing global risk on sentiment we might see a break of lower support and then a corrective move to 303-305 lvls. However if the breakout happens to the upside, then the measured move tgt from the daily flag is 320.
All in all I tend to play it for the short side now, maybe trying to catch a spike tomorrow for selling into it.
Some fundamental background: HUF used to be one of the best traditional carry trades for years, since it always had a high nominal and real rate, thus supportive swap points for short trades. However the current MPC of the National Bank is considered to be super dovish, with continous temptation to cut base rate as low as possible (Base rate is at 2,85 % now), while also pumping the economy with loads of liquidity through their so called growth credit program, with a maximum effective available rate of 2,5 % for companies. (special goulash QE :-) )
They always refer to their mid term CPI tgt, which is 3 %. While the last headline CPI print recently published showed a big 0 %, the number is tricky, as it is mainly due to continous central price management (forced px deflation) for the households utilities (gas, electricity, etc.) by the government. Meanwhile the core CPI is at 3,5 %, so we can say there's effectively a negative real rate in Hungary now. This can be harmful in the long run for the HUF, but for now it is well ballanced by EU funds inflow and C/A surplus, while the NBH fx reserves are at really high levels too.